Interesting (and unique) question! This period in Irish history (the 1641 Rebellion, the Wars of the Three Kingdoms, and their aftermath) have been highly politicized in the centuries since and have held an important place in folk memory. (Depending on one's perspective, these events are memorable for the cruel and bloody slaughter of English settlers or for the rebellion's severe repression that marked a strengthening Protestant hold on the island). Scholars argue that the bloodshed had a significant impact on the psychology of English settlers and colonizers in Ireland, most easily visible in sensational English news reports and engravings of the event, such as this one, which depicts "Companyes of the Rebells meeting with the English flyinge for their lives falling downe before them cryinge for mercy thrust theire into their childrens bellyes & threw them into the water," show how the Irish rebels were understood as bloodthirsty and inhumane. Over time, a narrative of English martyrdom for the Protestant cause in Ireland emerged. This image shows an interesting tension between the barbarity and savagery (traits long associated with Gaelic Ireland) of the rebels' acts and the foppish, cavalier dress of men who were members of the ruling Catholic gentry class in Ireland. Now, if we're talking about the ethnic dimensions of the conflict, we should note that these Catholic lords leading the coup against the English settlement were not synonymous with the Gaelic elite of the island. By the seventeenth century, the confusingly-named "Old English" population in Ireland, decedents of Cambro-Norman invaders from the twelfth and thirteenth centuries, had largely meshed culturally and religiously with the Gaelic Catholic populations of Ireland. So we're talking more about religious than political identifications here, which overlap but are not synonymous with Gaelic and Anglo identities.

The Act for the Settlement of Ireland was really about these (Gaelic and Old English) Catholic elites who had instigated the rebellion and who had led Royalist forces in Ireland during the Cromwellian conquest of Ireland (1649-52). Its basic aim was to establish a new landholding structure in Ireland. The Act put in place a yardstick to assess the extent of guilt of participants in the rebellion. Most people were given a pardon. The text of the Act declares, "it is not the intention of the Parliament to extirpate that whole Nation, but that Mercy and Pardon, both as to Life and Estate, may be extended to all Husbandmen, Plowmen, Laborers, Artificers, and others of the Inferior sort". These "inferior sort" were to submit themselves to English sovereignty and live peaceably. Catholics with land were to submit one-third of their estates. Officers who fought against Parliament in the Irish Confederate Wars were to be banished and two-thirds of their estates sacrificed. (Their wives and children could keep the remaining third.) But those deemed most responsible for the violence of the previous decade were to be tried for their lives and properties. These unpardoned groups were: all those who had been involved in the 1641 massacre, Jesuits and priests involved in the rising, 105 named magnates (fighting under the Marquis of Ormond who led the Cavalier forces in Ireland), anyone guilty of the murder of civilians, and those who refused to surrender.

Some of those whose lands were confiscated were allowed to pay a fine in lieu of actually submitting their lands, which caused a severe drain on landlord resources and a subsequent credit shortage for merchants affecting both Protestant and Catholic elites in Ireland. The lands that were confiscated got granted to "Adventurers," who had loaned Parliament money to put down the violence, and veterans of Cromwell's New Model Army. Some of these grantees sold their lands to Protestants already in Ireland looking to increase their landholdings.

The Act had punished Protestants (on the "wrong side" of the English Civil War) as well as Catholics--both Gaelic and Anglo--involved in the 1641 Rebellion and Irish Confederate Wars. However, they were not punished equally, and the effect was a significant increase in Protestant landholding in Ireland, though most Catholic Irish remained as farmers and tenants as they had before the rebellion. More generally speaking, the English approach to colonization in Ireland was not about ethnic cleansing (which of course is an anachronism) or the achievement of ethnic homogeneity. In broad strokes, the English project for reconquest in Ireland in the sixteenth and seventeenth centuries was to impose an administrative structure on Ireland that could effectively enforce English law, as scholars such as Ciaran Brady have argued. This project took many different forms over time (plantation of Protestant communities, surrender and regrant of lands under English authority, etc.), but they primarily targeted the elites. Those "inferior sort" of Gaelic Irish were useful for their labor, and schemes to plant Protestants in their place often suffered because of the unwillingness of English and Scottish settlers to go to Ireland.